Knowledge Center

What happens after a credit card is swiped or keyed? There are two main 'processes': Authorization and Settlement. Each function requires a series of communications between the Acquiring Bank and the Issuing Bank, (i.e., the bank that issued the customer's credit card). This communication transmits via the card associations 'Interchange Network' and is facilitated by a payment processor, (e.g. CMS).

The Issuing Bank either approves or declines the authorization based on whether or not it's a valid card number and whether sufficient funds are available.

CMS/ Acquiring Bank will then forward the response, (i.e. authorization approval number or decline code) back to the merchant's processing equipment.

Receipt is printed and signed by customer or transmitted electronically to customer.

Settlement/ Funding Process

To this point only data has been exchanged. The merchant must settle the transaction in order to receive the funds from the customer's credit card Issuing Bank. Merchant's typically settle all of their transactions once per day in a function called 'batching out'.

The merchant selects the 'batch out' function on his/her processing equipment which automates a settlement request to CMS. CMS/ Acquiring Bank will then convey the request to each Issuing Bank that generated a customer's credit card authorization approval code within the batch.

Each Issuing Bank sends a confirmation of the funds that are being transferred from each cardholder's account to CMS/ Acquiring Banks master settlement account.

CMS/ Acquiring Banks will then deposit the funds to the merchant's bank account through the Federal Reserve's Automated Clearing House (ACH), which is an electronic funds transfer system.

Issuing Bank simultaneously posts the charge to the cardholder's account which will show up on cardholder's credit card statement.

Businesses who apply for a merchant account are classified into specific 'Merchant Account Type' categories, based on the MCC or SIC codes they fall in, as well as how they collect card information and process transactions.

The two primary 'Merchant Account Types' are 'Card Present' (CP) or 'Swiped' transactions and Card-Not-Present (CNP) or 'Keyed' transactions. Within these two categories are sub-categories which are assigned based on the business environment and processing methods.

The sub-categories within the Card Present category include:

Retail Merchants: 'Retail' merchants typically conduct business in a storefront or a consumer facing office where they interact with their customers face-to-face and physically swipe cards through a terminal or Point-of-Sale system.

Restaurant Merchants: 'Restaurant' merchants require the ability to include tips to their charges. The tip function allows them to authorize a customer's card for a certain sale amount and then settle that authorization with an adjusted price to include the tip amount.

Lodging Merchants: 'Lodging' merchants (e.g. Hotels, Motels, et.) authorize a customer's card for a specific sale amount and later adjust and settle the authorization once the customer checks out to include additional usage fees, taxes, etc.).

Cash Advance: This sub-category is reserved specially for banks that have registered as a cash advance provider.

Purchasing Cards: These are typically business-to-business or government-to-business environments that with transactions in excess of $10k where specific verification criteria is required.

Supermarket: Businesses that qualify for this sub-category include grocery stores, convenient stores and miscellaneous food stores with small average tickets.

The sub-categories within the Card-Not-Present category include:

Keyed Face-to-Face Merchants: 'Keyed Face-to-Face' merchants eventually meet their customers in person to deliver the product or provide the service, (i.e. Food delivery, etc. ), but they don't actually collect card information with the customer or card present. Generally, they take orders over the telephone, via fax, mail, email, or the Internet, and then manually key-enter card information into a terminal, software, payment gateway, or other point-of-sale system.

Mail Order/Telephone Order (MOTO) Merchants: MOTO merchants rarely, if ever, meet their customers face-to-face. Instead, these merchants collect orders and card information over the telephone, by mail, fax, or via the Internet, and manually key-enter transactions through a software program or via a virtual terminal/ gateway.

Internet or E-Commerce Merchants: 'Internet' or, 'E-Commerce' merchants conduct all business online through a payment gateway that is integrated with their site's shopping cart.

The credit card payment network delivers immense value to all constituents in the payments chain. This complex financial system enables any bank in the world to link its customers (both businesses and credit card carrying consumers) with those of any other bank to transact business almost instantaneously.

Interchange is a fee paid by a merchant's bank (also known as the Acquiring Bank) to the cardholder's bank (the Issuing Bank) to compensate the Issuing Bank for a portion of the risks and costs it incurs. Below is a diagram to help illustrate the Interchange process further:

Interchange fees are determined by the payment Card Associations, (i.e. Visa, MasterCard, etc.). The rate that you pay for a transaction varies depending on type of card, (i.e., debit, credit, rewards card, etc.) and the type of transaction, (i.e., if the card is present, a phone or Internet order, etc.). The fee charged is also tied to the level of risk for that transaction; the lower the risk, the lower the rate. So for example, a transaction conducted with a card that is present and can be swiped on a terminal is a lower risk and fee than a card-not-present transaction.

In addition to interchange fees, the individual payment brands may charge a separate assessment fee, which covers the operating costs of managing their network.

If you have any questions about any of the fees that appear on your CMS monthly statement, please call our customer support number 877-267-4324 (option 2).

Swipe cards instead of hand-keying the card number when in a Face to Face environment.

Utilize the Address Verification Service (AVS). By confirming the zip code, you not only reduce your fees, but it's an added layer of protection against accepting a stolen credit card.

Settle or close your transaction batch the same day the authorizations occur.

What is Downgrading?

Transactions are downgraded when they don't meet interchange requirements, such as not capturing the correct card information at the point of sale, settling the transaction after a deadline has lapsed (typically 24 – 48 hours after the authorization) or key-entering rather than swiping a card. A downgraded transaction results in a higher cost for the merchant.

A chargeback is a dispute between a merchant and its customer (who paid by credit card). The customer or cardholder tries to claim that their purchase wasn't fulfilled by the merchant, etc. and the merchant tries to prove that they did adequately render service by providing a receipt, signed agreement, recorded conversation, etc. The cardholder typically has anywhere from 45 to 180 days to submit a chargeback after the date of purchase or service rendered.

The chargeback process of who wins and who loses is essentially a mediation between the credit card Issuing Bank and the Acquiring Bank (as a processor, we partner with Acquiring Banks). When a chargeback is received by an Issuing Bank from one of their disgruntled cardholders, the funds are immediately debited from the merchant's account by the Acquiring Bank and placed in the consumer's respective account while the dispute is decided. This mediation process is governed by Visa/ MasterCard chargeback rules and regulations. If the Issuing Bank and Acquiring Bank can't come to an agreement, the chargeback will go to arbitration where a Visa or MasterCard rep (depending on the card) will ultimately decide who wins. If the chargeback is deemed valid, the consumer retains the funds. If the chargeback is deemed as invalid, the funds are again debited from the consumer and re-deposited to the merchant's account.

The best way to resolve a chargeback is to prevent it from happening in the first place. Below are some simple measures that can help mitigate chargebacks from occurring:

Often, disputes are due to 'friendly fraud' or the customer simply has buyer's remorse. The best way to avoid this type of chargeback is to work closely with the customer to establish a mutually satisfactory solution. A partial refund is optimal, but even a full refund is better than a chargeback (unless you genuinely feel the customer is being dishonest).

When possible, obtain the cardholder's signature. The cardholder's signature on card-present transactions is required. Failure to obtain the cardholder's signature could result in a chargeback for "no signature" if the cardholder denies authorizing or participating in the transaction.

Have your return/refund policy clearly stated at your retail checkout and on your Website. Make the customer confirm that they have read the policy before their order can be processed.

Use a clear descriptor that customers will recognize (A descriptor is the name customers will see on their credit card statement to represent the purchase).

Always add your phone number to the descriptor. If the customer does not recognize your descriptor, they can call the number to clarify the purchase.

If the service to be provided to the customer will be delayed, notify them by phone and in writing. Communication is the key.

If the product ordered is out of stock or the item is no longer available, advise the cardholder verbally and in writing and offer the cardholder the option of purchasing a similar item or canceling the transaction. Giving the customer the option to cancel should help avoid a dispute.

Always respond quickly to a dispute. There is a limited amount of time to respond and if you miss the deadline, you forfeit your ability to fight the chargeback.

Utilize the Address Verification Service (AVS) and or the CVV2 security code on the back of the card. This requires the customer to confirm their zip code or security code and is a simple way to deter the acceptance of stolen credit cards. If necessary, you can even call the Voice Authorization Center to verify the customer's name, address and phone number.

Call and confirm large or suspicious 'card-not-present' orders. If you are unable to reach the customer you should void this transaction prior to settling your batch.

Always get signature for proof of delivery. Be able to provide a shipping tracer log that shows that the customer received the shipped goods.

If it is a custom order or there will be a delay in delivery, wait to process your customer's credit card until the time the product is shipped.

If a customer requests cancellation of a recurring transaction that is billed periodically, always respond to the request and cancel the transaction immediately.

Always obtain an authorization for the exact amount of the transaction processed to the card.

If a card does not successfully swipe and you have to key in the transaction, manually imprint the card and have the customer sign the imprinted copy.

Have your return policy pre-printed on the credit card sales draft and signed by the cardholder at the time of the original sale. Ensure that the refund policy is clearly stated on the sales draft.

Always compare the cardholder's signature to the signature on the back of the card. If the signature section is blank, request that the cardholder sign it. If the cardholder refuses, request another form of payment.

Do not complete a transaction if the authorization request was declined.

If you receive a "Call" message in response to an authorization request, call your authorization center. This is often due to misuse of a card. If the authorization is approved, write the authorization code on the receipt.

Settle your authorizations daily. Failure to deposit in a timely manner can result in chargebacks for "late presentment."

Settle your credits or refunds daily. Failure to process credits in a timely manner can result in chargebacks for "credit not issued."

Be suspicious of high-ticket sales requested to be sent next-day air or if a runner will be in to pick up the purchase at a later time.

Be very guarded against foreign orders. Typically, orders from Asia, the Middle East and Africa are fraudulent.

Do not accept orders with domestic billing addresses and foreign shipping addresses.

EMV stands for Europay, MasterCard, Visa and was introduced by the Global payments brands in 2011.

When will EMV be implemented?

Specific timeframes have been implemented to roll out EMV across the United States. In 2011 Global payments brands introduced the roll out through having three specific time frames. The first time frame was set for April 2013 when all back end processors had to be equipped to accept EMV based payments from merchants. The second time frame will be in October 2015 when the liability of fraud will shift (excluding Automated Fuel Dispensers) and will fall on the merchant. The final milestone will be at the beginning of 2017 when Automated Fuel Dispensers will assume the liability.

What is a Smart Card?

A Smart card is also known as an EMV payment card. This type of credit card is equipped with smart chip technology. This chip contains the vital information needed to validate and run a secure transaction. The technology is used to help increase security for the merchant and consumer.

Is EMV more secure?

EMV is a more secure way for processing transactions. The smart chip technology allows the authentication of the card during the payment transaction. This authentication helps protect against counterfeit cards and creates unique transaction data that cannot be duplicated for additional transactions.

The card will also use a specific verification. This verification uses four different cardholder verification methods. Each method helps to confirm if the transaction should be authorized.

An additional feature with EMV smart cards are the option of chip and pin. Some of the cards that are issued will involve a chip and pin. In order to run a transaction the customer will be required to insert or tap their card for the terminal to read the chip. They will also be required to enter a four to six digit personal identification number.

How Does EMV work?

The chip within the smart card has an embedded encryption that contains specific information about the card and the user. This information is transferred through the equipment during a sales transaction. This encryption provides additional security levels when processing the transaction.

How do I run a Smart Card?

The consumer will insert their EMV smart card into the point of sale devise (Figure 1 and 2).
If the chip is not able to be read by the machine it will prompt for a fall-back transaction and the customer will need to swipe their card (Figure 3).

The cardholder will then enter their PIN if prompted.

The chip and terminal will then determine the transaction type and generate the cryptogram.

The cryptogram is then released and submitted to the processor to collect an approval or decline.

How will the Liability Change with EMV?

The liability for a business owner will change once EMV has been fully implemented in October 2015. Currently fraud from a business that runs face to face transactions will rest on the bank/issuer. Any loss within a fraudulent transaction is absorbed by the bank/issuer unless dispute resolution is passed onto the acquirer/merchant. This dispute resolution is also known as the chargeback system. In October 2015 the liability will then shift to card-not-present environments and merchants that are not using EMV capable solutions.

What Does an EMV terminal look like?

New Terminology

Chip and Pin: To perform a transaction a customer will be required to insert their card and enter a four to six digit personal identification number.

Chip and Signature: To perform a transaction a customer will be required to insert their card and provide a signature to the EMV terminal.

Dipping: A process where the card holders will insert their smart card into an EMV supported device. This is usually done through a slot within the EMV supported device.

EMV: Europay, MasterCard, Visa

Fall-Back Transaction: If the terminal does not accept the chip it will require the customer to perform a traditional swipe of the card in the terminal.

A member of the Visa/ MasterCard network that acquires data relating to transactions from a merchant for processing. All merchant accounts must be sponsored by an Acquiring bank. They are responsible for depositing the funds into a merchant's bank account. Also referred to as a Sponsor Bank or Member Bank of Visa/ MasterCard.

Address Verification Service (AVS)

AVS is a tool for merchants to reduce the risk associated with card not present transactions, such as mail order, telephone order or Internet transactions. The billing address given by the customer is passed in the transaction and it is checked against the billing address on file at the customer's card Issuing bank.

Adjustment

An adjustment is initiated by the Acquirer to correct a processing error. The error could be a duplication of a transaction or the result of a cardholder dispute. The Acquirer debits or credits the merchant DDA account for the dollar amount of the adjustment.

Approval Code

The 6-digit code returned to the merchant upon approving a transaction.

Arbitration

The procedure used to Visa & MasterCard to determine responsibility for a chargeback if the Issuing Bank and Acquiring Bank cannot resolve it on their own.

Authorization

The process whereby a transaction is approved by an Issuing bank before the transaction is completed by the merchant. An approved authorization places a hold against the cardholder's credit limit for the dollar amount approved. Most authorizations have a life cycle of three to five days, then the hold against the cardholder's credit limit is released. A transaction, which settles, will usually match an approved authorization amount and clear it from the authorization status, thus removing the hold against a cardholder's credit limit.

Authorization Code

A code that indicates the approval or rejection for an authorization request. The code is returned in the authorization response message and is usually recorded on the transaction receipt as proof of authorization.

Automated Clearing House (ACH)

is an electronic network for large volumes of credit and debit transactions in batches. ACH credit transfers include direct deposit payroll and vendor payments. Debit transfers also include new applications such as the point-of-purchase check conversion program sponsored by NACHA-The Electronic Payments Association. Both the government and the commercial sectors use ACH payments.

Average Ticket Size

The average dollar amount per sale or transaction that a merchant processes.

Bank Identification Number (BIN)

The first four to six digits of a credit card. The bank identification number identifies the institution issuing the card. Acquiring banks are also assigned a BIN number to distinguish them from each other.

Basis Points

Basis points are the increments by which discount rates are calculated. One basis point is equivalent to .01% or .0001.

Batch

A collection of credit card authorizations or transactions saved for submission at one time. An 'open' Batch has a group of unsettled authorizations that must be 'closed' in order for the merchant to receive their funds. Batching generally occurs at least once per day.

Cash Advance

A cash loan obtained by a cardholder through presentation of his/her credit card at a bank office or automated teller machine.

Capture

Converting the authorization amount into a billable transaction record within a Batch. Transactions cannot be captured unless previously authorized, and authorizations should not be captured until the goods or services have been shipped or conveyed to the consumer.

Card Present

A transaction that takes place in a face-to-face environment where the cardholder physically swipes their credit card on a terminal or POS system and signs a receipt.

Card Not Present

A transaction where the card is not present at the time of the transaction such as a mail order, telephone order, or Internet order. Credit card data is manually entered into a gateway or POS system as opposed to swiping a credit card's magnetic stripe through a terminal.

Card Verification Code (CVC)

A unique check value encoded on the magnetic stripe of a card to validate card information during the authorization process. The card verification value is calculated from the data encoded on the magnetic stripe using a secure cryptographic process. This method is used by MasterCard.

Card Verification Value (CVV)

A unique check value encoded on the magnetic stripe of a card to validate card information during the authorization process. The card verification value is calculated from the data encoded on the magnetic stripe using a secure cryptographic process. This method is used by Visa.

Check Verification

A system providing merchants with varying degrees of insurance against bad check losses by verifying the authenticity of the check and/or its presenter by using a check processing organization.

Chargeback

A chargeback is the result of an action taken by a cardholder who disputes a credit card transaction through their credit card Issuer. The card Issuer initiates a chargeback against the merchant's account. The sale amount of the disputed transaction is immediately debited from the merchant's bank account. Merchants typically have 10 days in which to dispute the chargeback. This may be accomplished by providing the card Issuing bank with a proof of purchase by the cardholder. This could be a signature or proof of delivery. A chargeback fee is generally assessed to the merchant account by the merchant bank for the handling of this process.

Close Batch

The process of submitting a batch of authorizations for settlement.

Credit Limit

The dollar amount assigned to a cardholder as the limit of credit that they are approved to borrow. Credit card purchases are actually loans to the cardholder by an Issuing bank.

Credit/Return

If a customer is unhappy with the product or service they purchased and want a refund the merchant will issue a credit or refund to the cardholder.

CVV2

CVV2 is a three digit security code that is printed on the back of most credit cards. The CVV2 program is designed to reduce fraud in the card-not-present environment by validating that a genuine Visa/MasterCard credit card is being used during a transaction.

Debit

A charge to a customer's bankcard account. A transaction, such as a check, automated teller machine (ATM) withdrawal, or point-of-sale (POS) debit purchase that debits a demand deposit account.

Debit Card

A financial instrument used by consumers in lieu of cash. Unlike a credit card, debit card purchases are automatically deducted from the cardholder's account.

Doing Business As (DBA)

The trading name or publicly recognized name of a corporation.

Descriptor

The unique identifier that shows the business name and phone number for a purchase on a customer's credit card statement.

Demand Deposit Account (DDA)

A checking account, which must be linked to a merchant processing account to deposit funds to and debit funds from as needed. This is often used as a sweep account.

A fee taken by the bank as a percentage of all sales transactions. Transactions fall into three main discount based on the card type and charge type. They are Qualified, Mid-Qualified and Non-Qualified.

Electronic Benefits Transfer

The process by which food stamps and other government benefits are converted from paper checks and coupons to secure debit cards.

Electronic Draft Capture (EDC)

A method of processing bankcard transactions electronically where the transaction information (e.g., cardholder account number, transaction amount, transaction date, authorization number) is captured electronically and housed in the POS terminal until the terminal is settled.

Electronic Funds Transfer (EFT)

Process of electronically transferring funds to or from an account.

Encryption

The technique of modifying a bit stream on a transmission line so that it appears to be a random sequence of bits to an unauthorized observer.

Gateway

A payment gateway is an e-commerce application service that authorizes payments for e-businesses, online retailer or traditional brick and mortar business. It is the equivalent of a physical point of sale terminal located in most retail outlets. Payment gateways protect credit card details by encrypting sensitive information, such as credit card numbers, to ensure that information is passed securely between the customer and the merchant and also between merchant and the payment processor.

Guarantor

Most merchant accounts are personally guaranteed by the owner of the business/ merchant account. The guarantor agrees to protect the merchant processor/ Acquiring Bank from any losses that may occur as a result of the transactions the merchant accepts.

Imprinter

An old fashioned handheld device that enables a merchant to manually produce a carbon copy image of the raised (embossed) numbers/ characters on a credit card by sliding the device across the card. Also known as a 'knuckle-buster".

Independent Sales Organization (ISO)

An organization that registers with Visa & MasterCard via one of their Member/ Sponsor Banks to market, setup and maintain merchant accounts.

Interchange

The exchange of information, transaction data and money among banks. Interchange systems are managed by Visa and MasterCard associations and are very standardized so banks and merchants worldwide can use them.

Interchange Fee

The amount paid by the Acquiring Bank to the cardholder institution (issuer) on each sales transaction. Interchange rates vary according to the type of merchant (retail, travel and entertainment, mail order) and the method of processing (paper, EDC).

Issuing Bank

An Issuing Bank is any Visa/MasterCard Member Bank that enters into contractual relationships with cardholders for the issuance of cards.

JCB Card

This is a card issued by JCB (Japan Credit Bureau) International Credit Card Company, Ltd.

Keyed Transaction

This is a transaction where the information from a credit card is manually typed into a terminal or payment gateway. A transaction is keyed because either the card is not present at the time the transaction is entered or the equipment being used to process the transaction can't read the card.

Manual Close

A batch close that must be initiated by the merchant on a daily basis, as opposed to a programmed or automated pre-set batch close time.

Member Bank

This is the same as a Sponsor Bank or Acquiring Bank. It's a banking entity that is a registered member of Visa and MasterCard's payment network.

Member Alert to Control High Risk Merchants (MATCH)

MATCH is an electronic bulletin board or notification system used to track individuals and businesses whose merchant processing activity has been deemed 'high risk' due to aggressive marketing tactics, neglect or fraud.

Merchant

Any business that accepts VISA/ MasterCard bankcards as a form of payment.

Merchant Account

A specialized business bank account setup to enable businesses to accept credit cards.

Merchant Agreement

A binding agreement between a business owner and a merchant processor/ Acquiring Bank outlining each parties respective rights, duties, and warranties with respect to the acceptance of bankcards.

Merchant Category Code (MCC)

Four-digit classification code assigned to an entity which categorizes the organization based on its principal profession and the way it conducts business. These codes help assign the appropriate risk associated with certain business types.

Merchant Identification Number (MID)

A series or group of numbers that uniquely identifies a merchant for account and billing purposes.

Member Service Provider (MSP)

An MSP is synonymous with an ISO, MSP being MasterCard's classification. It is a 3rd party company who is registered with Visa & MasterCard via a Sponsor/ Member Bank to market, setup and maintain new merchant accounts.

Merchant Statement

A billing statement or summary of processing activity and charges for a given period of time which is mailed to the merchant or made available online each month.

Mid-Qualified

Transactions that do not meet Visa/MasterCard Interchange criteria are downgraded from Discount 'Qualified' to either Discount 'Mid-Qualified' or Discount 'Non-Qualified'. The latter two are processed at a higher Interchange rate. Transactions are typically downgraded to the status of 'Mid-Qualified' because they were 'keyed' rather than swiped. Many 'Rewards' cards are also processed as 'Mid-Qualified' transactions.

Monthly Minimum

The minimum amount of fees charged by a merchant processor in a given month. If the merchant's account activity does not generate the monthly minimum, the merchant is required to pay the difference.

Mail/Telephone Order Merchant Type (MOTO)

A merchant that transacts business in a card-not-present environment. Orders are taken over the phone or by mail.

Monthly Volume (MV)

The maximum monthly dollar volume a merchant is approved to process in Visa and MasterCard & Discover transactions. This amount is typically based on the merchant's credit worthiness as well as previous processing history. American Express processing volume is not included in the calculated monthly volume.

Non-Qualified

This is an Interchange classification where the transaction is downgraded from Discount 'Qualified' or 'Mid-Qualified' to 'Non-Qualified'. This is typically a card-not-present transaction that fails to include the billing address at the time of authorization; however, a transaction can also downgrade to 'Non-Qualified' if the merchant doesn't settle the transaction in the allotted timeframe. This downgrade also applies to charges on Government, Corporate and Foreign Cards due to the elevated risks inherent with those types of credit cards.

Offline/Signature Debit

This refers to a debit card transaction that does not include the cardholder's PIN number. It will not debit the cardholder's account immediately, but rather will run through the credit card network and will be treated as if it were a credit card.

Online Debit

This refers to a debit transaction that is authorized with the use of a PIN number. No signature is needed for this type of transaction. Online debit transactions are charged a flat fee instead of a combined discount rate and transaction fee.

PIN (Personal Identification Number)

A PIN is a personal identification number used by a cardholder to authenticate card ownership for ATM or debit card transactions.

PIN Pads

Pin pads are small key pad devices that are connected to a processing terminal or register and used by cardholders to enter PIN numbers on debit card transactions.

A company that partners with Acquiring Banks as well as organizations at various levels within the electronic payments industry, (i.e. FSP's, ISO/MSP's, MLS's, etc.) to provide them with the platform and technology necessary to setup and maintain merchant accounts. Most processors also sell directly to merchants.

Purchase Cards

Purchase Cards are credit cards for use by employees of government agencies or corporations. What makes Purchase Cards different from ordinary credit cards is that they may only be used at certain types of merchant locations.

Qualified

Discount Qualified transactions meet all the necessary Visa/MasterCard Interchange criteria to receive the lowest possible Interchange rates/fees. These transactions are swiped in a face-to-face environment and are authorized and settled in the same day.

Refund Policy

A merchant's policy for handling returned merchandise or service where the customer was dissatisfied. Acquiring Banks/ Processors typically require a written refund policy for each applicant. From the Processor/ Banks perspective, the more liberal a merchant's refund/return policy is the better as it may reduce the number of chargebacks a merchant receives.

Recurring Transactions

A transaction where the cardholder has given a merchant permission to periodically charge the cardholder's account (e.g. monthly subscription to a magazine, etc.).

Representment

The second stage in the chargeback process. This step includes the Acquirer's response to an Issuer's chargeback by returning the disputed transaction with additional documentation to the Issuer.

Reserve

A method in which a percentage of the sale amount is retained by the Processor/ Acquiring Bank to protect themselves against fee related or chargeback losses.

Retrieval Request

This is when the cardholder's Bank (Issuing Bank) requests documentation regarding the transaction from the Acquiring Bank. This is typically done when an Issuing Bank is not sure if its cardholder can substantiate a chargeback so they initiate this discovery process to retrieve documents.

Reversal

An online financial transaction used to negate or cancel a transaction that has been sent through interchange in error.

Sales Draft

The paper form used by the merchant and signed by the cardholder to document the sales transaction.

Settlement

The process by which credit card sales authorizations are batched and progress from an exchange of data to actually funding the merchant's bank account. The point of sale to the merchant settling and physically receiving its funds is typically 24-48 hours.

Shopping Cart

An online application in an e-commerce environment that is integrated with a point-of-sale software or payment gateway to process a secure credit card transaction.

Smart Card

A credit or debit card containing a computer chip with memory and interactive capabilities used for identification and to store additional data about the cardholder.

SSL Certificate

This is a certificate which is installed on a secure server and is used to identify the merchant using it. It encrypts credit card and other sensitive data to help securely process a transaction.

Standard Industry Code (SIC Code)

Similar to an MCC code, an SIC code is a four digit, numeric identifier of merchant business types based on its principal profession and the way it conducts business. These codes help assign the appropriate risk associated with certain business types.

Swiped Transaction

This is the action of physically sliding a credit card through a terminal or magnetic stripe reader that "reads" the magnetic strip on the back of all credit and debit cards. The value of swiping a credit card is very high in that it documents the physical presence of the card at the point of sale. By definition, all swiped transactions are card present transactions.

Terminal

A hardware device equipped with a magnetic strip reading device that is placed at the merchant location to electronically process credit card transactions. Terminals are capable of authorizing, capturing and settling credit card and ATM/Debit card transactions.

Terminal ID (TID)

A TID is a number assigned to processing equipment devices to help connect the equipment to the Processor and Acquiring Bank. A TID can be used for all processing equipment, (e.g., wired & wireless terminals, payment gateways as well as other software applications.

Transaction

Any action between a cardholder and a merchant that results in activity on the cardholder's credit card account.

Transaction Fee

This is a per item fee charged for each sale or order that is electronically processed.

Void

The reversal of an approved transaction that has been authorized but not settled. Settled transactions require processing a credit back on the card in order for the transaction to be reversed. A void does not necessarily remove the hold the Issuing Bank may have placed on the cardholder's card.

Voice Authorization

An approval response obtained through interactive communication via telephone, facsimile or other automated forms of communication.